Do you dream of owning your own hunting land? Maybe you’ve been leasing hunting property, and think it would be more convenient to just own the property. Maybe you plan to hunt on the property and farm some as well.
Hunting land is increasingly being bought because the amount of available public land is declining.
The goal of buying hunting land is often driven by the fact that an increasing number of hunters are chasing limited amounts of land. In spring 2016, the number of people who went hunting within the last 12 months totaled 16.61 million (source).
While many people want hunting land for their personal use, others purchase hunting land as an investment. This often includes making improvements that will make the land more attractive to hunters. For example, strategic cutting of timber may make the land more attractive to certain species of animals. And, improved hunting opportunities will make the property more attractive to others.
As suburban development is taking land once used for hunting, an increasing number of hunters are buying hunting land. But how do you finance hunting land?
Finding hunting land loans
Not all banks offer hunting land loans. Far fewer lenders sell hunting loans than mortgage loans or auto loans, for example.
Lenders like their loans to be collateralized. That means they like it to be backed with something they can sell if borrowers suddenly become unable to pay. Mortgages are collateralized with your house. If you default on a mortgage, the bank can take your house. They sell it and get their money back.
If you are a homeowner you may be able to use your house as collateral for a land loan. But that carries some risk, and not all banks will do it. Using your home as collateral may help you get the loan and may even get you a lower interest rate. But keep in mind that you are agreeing that if you do not repay the loan the lender can take your home.
Hunting land may be “raw land.” Raw land is unimproved. It has no water available and no sewer hook-ups, for example. Because of its raw state, it may be hard for the bank to sell if the borrower defaults on the loan.
Hunting land is often rural. Large lenders or online lenders may know little about the area. If they don’t know it, they may not approve loans.
Your best bet is to approach regional and local lenders. If you’ve been hunting in an area and like it, check around for a local credit union or regional bank.
Look to see if any lenders in the area specialize in agricultural or farming loans. If they do, they may do hunting land loans as well. Hunting land has much in common with farming land because both require maintenance and conservation practices.
Some agricultural lenders might have terms that make payment of hunting land easier. They do not always ask for monthly payments. Farmers’ incomes vary considerably from season to season. Many agricultural lenders will take quarterly or yearly payments as a result.
You can also use a land broker to find land and help you with the purchase. A land broker will charge a fee, usually a percentage of the land’s price. Land agents have knowledge of local zoning regulations and they will be helpful in solving issues that come up, such as gaining access to the land.
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Applying for a hunting land loan
A large part of what you’ll need to finance the purchase of hunting land is the same as you’d need for any other loan, like a mortgage or car loan.
The application process will include providing information about your salary, any investments, and the amount of debt outstanding you have. You’ll need your credit score. Banks will likely want to see an excellent to good credit score to approve any loan. A good credit score is 700-749, and anything above 750 is excellent.
Lenders are taking a greater risk than they would for, say, a loan for a house. And you are asked to bear a larger financial burden accordingly.
It’s common for lenders to charge higher interest rates for raw land loans. A lender will ask for a down payment. It may be 20% of the entire loan, like many mortgages. But for financing hunting land, lenders often ask for more. You may have to have up to 50% of the loan as a down payment. So if your hunting land costs $50,000, you may need as much as $25,000 upfront. Handling the down payment can be the most difficult hurdle of buying hunting land.
Getting preapproved for a loan will help the buying process go smoother. Not only will you know that you can get the loan, but also, having a preapproved loan can help you negotiate a better price. (Source: TIME). It’s important to note that according to federal law, most loans for over $250,000 require an appraisal that conforms to the Uniform Standards of Professional Appraisal Practice (USPAP).
You are more likely to get the best deal by comparing terms for several lenders. Check the annual percentage rate (APR) of interest. Banks are required to give you the APR. Ask about loan origin fees and other fees. Check to see if there is any penalty for prepayment (paying the loan off quicker). Read and compare reviews on lenders you are considering.